Vitter’s Not-Everything’s-A-Bank Amendment Drives Progressives Nuts

by John Berlau

By now, readers of BigGovernment.com know that that the Democrats “Wall Street Bank” bill, which may get a final vote as early as this week, will reach far beyond Wall Street and ensnare businesses not typically thought of as “banks.” Stories here by this author and others have laid bare provisions of the Obama-Dodd-Frank-Everything’s-A-Bank bill that broadly define a “financial company” as any business “substantially engaged” or “significantly engaged”  in financial activities. And if your business happens to fall in such a category, it could be subject to a bailout “assessment” tax to bail out a high rolling financial firm, intrusive regulation by a banking agency or the new Bureau of Consumer Financial Protection, or even outright nationalization if the troika of the Federal Reserve, Treasury Secretary, and Federal Deposit Insurance Corporation decide your firm is a threat to “financial stability.”

david_vitter_horiz

Trouble is, though its audience is growing by leaps and bounds every day, this site is still at the point in which not every American relies on it for essential political info. And because Republicans have done a mediocre job of explaining how far this bill would reach, and the establishment media largely has no interest in explaining these facts, supporters of Senate Banking Committee Chairman Chris Dodd’s “Restoring American Financial Stability Act” have been able to get away with saying, “If you’re against this bill, you’re against reform of Wall Street.”

Or at least, that was the case until a couple days ago. That’s when Sen. David Vitter (R-La.) introduced an amendment with a straightforward message: A bill that claims to be about fostering transparency on Wall Street should itself be transparent in its objective and not sneak regulation on Main Street manufacturers and retailers.  Call it (and I just did) the Not-Everything’s-A-Bank Amendment.

Vitter has distinguished himself with his dedicated efforts in fighting for real financial reform.  He co-sponsored with self-proclaimed (but not necessarily sole) Senate socialist Bernie Sanders (I-Vt.)a bipartisan amendment similar to the measure in the House bill to have the Government Accountability Office audit the Federal Reserve. When Sanders and others went for the Obama administration”compromise” of a one-time audit of a limited part of the Fed’s operation, Vitter carried the flag of Fed transparency.

Vitter’s new amendment provides similar sunshine the bill’s supposed reform efforts. It changes the vague language in Dodd’s current bill that would enable Federal Reserve supervision of any firm “substantially engaged in activities in the United States that are financial in nature” to the stricter “predominantly engaged.” And this amendment precisely defines “predominantly engaged” as a business that makes no less than 85 percent of its revenue from financial activities.

“I have a huge concern about the bill overall allowing the government to grab control of the economy,” Vitter told the Wall Street Journal. “I’m looking for ways to appropriately limit that.”

The amendment serves two noble purposes. If it passes, of course, it will ensure new financial rules, however onerous they are, will only be directed at truly financial companies – not be used as an excuse for back-door control of firms the government wants to target for whatever reason. And the second purpose it serves is just to end the progressives’ rhetorical shell game.

And quite frankly, it is driving the Left nuts. After weeks of castigating critics of the bill as favoring Wall Street over Main Street, suddenly in opposing Vitter’s amendment, progressives are forced to explain why they favor such intrusive regulation over Main Street businesses that had nothing to do with the crisis. And they are tying themselves in knots trying to do so.

Take a look at this tortured defense of the Dodd bill’s broad “financial company” definition from the Huffington Post. “The Vitter amendment must be defeated,” writes Jane D’Arista, who is with some entity called SAFER — (Economists’ Committee for Stable, Accountable, Fair and Efficient Financial Reform) She tries to explain that “replacing ‘substantially’ with ‘predominantly’ to define the level of financial activity permitted for non-financial firms may seem like no more than a relatively small change in wording. In reality, it is a change that threatens to erase those structural elements that have ensured a fair, open and competitive US financial system.”

Got that?!  I think what she’s trying to say is that to ensure “a competitive U.S. financial system,” we have to treat a variety of businesses just like banks. Oh, okay. Interestingly, the article has been up for two days on HuffPo with zero comments. D’Arista’s logic – or lack of it – seems to have left the site’s readers speechless – for once.

So the new smear tactic is to accuse Vitter of carrying water for none other than General Electric, parent company of HuffPo’s favorite cable news network, which has subsidiaries that engage in a lot of genuine financial actvities  “GE Wants To Be Saved From Reform Bill,” blares the front page of HuffPo as of this writing. “GE and other manufacturers back exemption in financial regulation bill” screams a headline in the Washington Post.

Yes, you see, apparently staunch conservative Vitter has introduced an amendment solely to benefit a company whose cable network blast Republicans and Tea Partiers, whose lobbyists press for cap-and-trade, and whose CEO showers praise on President Obama. Makes perfect sense!

And then there’s just one minor thing.  GE Capital already owns two federally insured banks. That’s how, as ProPublica explains, it qualified for the FDIC’s Temporary Liquidity Guarantee Program in 2008. Any bank falls under banking regulators, and to the extent its transactions with the parent company poses risks to the deposit insurance fund, the parent company does as well.

Plus, GE Capital as a finance subsidiary would more than meet Vitter’s 85 percent. This is something that the Washington Post story, despite its headline, more or less admits if the reader is patient enough to wade halfway through the article. “The subsidiary company could still come under scrutiny,” the article points out.

If anything, to draw from Washington Examiner columnist Timothy P. Carney’s illustrations of big business and regulation, GE would benefit from having its smaller manufacturing rivals being forced to comply with banking regulations it already has to comply with. GE serves the same purpose for progressives in trying to defeat the Vitter amendment as Goldman Sachs served in ramming the bill through: a useful decoy that in reality stands to benefit from the bill at large.

As early as today, a vote may be called on cloture to end debate and have a vote on the final bill. Cloture to end debate takes 60 votes, and it represents the Senate Republicans last shot at stopping this destructive bill or making it better, although each House will likely have to vote on some version of the bill again, and the House –Senate conference may take longer than expected, giving critics of the bill some additional time to make their case.

There are many reasons for the GOP and truly moderate Democrats in the Senate not to grant cloture. Even if the bill was primarily concerned with Wall Street, it still does nothing about Fannie and Freddie, But making sure the Wall Street bill is actually about Wall Street – or at the very least about banks – should be a line in the sand.

There should this firm message. “No Vitter  amendment. No cloture.  No dice!”


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Posted May 19th 2010 at 10:21 am in Congress, Economics, Financial Services, Politics, Regulation | 69 Comments